20 unit complex analysis- 45% occupancy

[Mack McPhatter]

I have been in discussions about purchasing a 20 unit apartment complex and have some questions. 

Property details

Price- $350k

20 units- all 2/1.5 townhome style apartments

Rents- $500 per unit 

Taxes- $9k per yr (per financials provided)

Insurance- $11k (per financials provided)

Utilities(water & sewer)- $12k

Market rates are $625-$675. HUD fair market rent is $757 for 2 bedrooms in my county.

16 units do need some updating which I would do a few units per month until complete. 4 have been recently updated. 

Not a terrible area, there are definitely worse in town.  2 complexes next door have hurricane damage and are condemned.  I talked to the city and the local housing authority is taking them over and updating both complexes which should help my property value.

Problem 

Only 9 of the 20 units are currently rented.  The owner doesn't accept Section 8 because "it's a hassle."  This area would be mostly Section 8 tenants so they are eliminating their biggest costumer. 

Background of property

The complex is owned /managed by a local family that owns a 15+ complexes but the owners are older and don't seem to be taking care of business like they did at one time.  A few of their properties are for sale so it seems they are downsizing.

No advertising is done at all.  The only place to find info on the property is on their family website(which looks like it was designed by a 8th grader) or driving by the property and calling the number on the sign. 

At current occupancy I could pay my note with not much room for error.  I do think with marketing, accepting section 8, updating, and raising rents that I could make this a workable deal.

Questions

This would be my first property marketed towards Section 8, so I am kind of leery of the deal to start with.  I went to the housing authority today and they were no help.  They told me to go to their website and wait for people to apply then come back once I had an interested renter.

How do I find out if there is a need for Section 8 in that area? 

Is there a surplus/shortage of places that accept Section 8 in the city?

I was originally excited about the city taking over the eyesore next door, but now I'm worried that I would be competing directly with them for renters.  Can the housing authority push renters towards certain properties?

I would be buying the property based on the assumption I could increase occupancy and rent rates, which is risky.  Any thoughts on this kind of speculative purchase? 

Any other thoughts on this property fill free to share...